Where does that new money come from? The only money out there is money that would usually get invested in things, and due to the regulations, there is less of it. So there is less money for investments, so the economy suffers.

Why is there less money for investments? Even if there is a fixed pot of money for investing, the money just shifts from old investments to new ones, which isn't a loss at all; it is a redistribution. Happens every time there is new technology. In fact, there often is, in fact, money that wasn't previously invested which is newly invested in emerging technologies (eg. the tech boom of the 90s resulted in a lot more money being invested than had been before. IOW, new money).

After the first year, 10 cars go off the road, 5 are added, we now only have 95 cars, and there is still, presumably, a "demand" for 100 cars.

It's clear you don't understand the concepts of Supply and Demand. Supply is the number produced (for a certain price), and Demand is the number people want to buy (at a given price).
In your example the demand for cars is 5, not 100. And new cars and used cars have completely different demand curves (there's a different demand curve for each model, but we can aggregate for new cars as a whole).

Let's say that at an average price of $20,000 producers are willing to make 100 cars a month and people are willing to buy 100 cars a month at $20,000 (we're at equalibrium). Now, if everything else is equal and car makers just misjudge the demand and set the average price drops to $18,000 and, at that price, want to make fewer cars so they can allocate more resources to pick-up trucks, the demand for cars at the new lower price will be even greater than 100, so we have a shortage. To correct the shortage, car makers make more and charge more (because they can) until the supply and demand curves intersect.

But regulation shifts the supply curve. Let's say a new emissions control is mandated. Cost of production increases so that for an average of $20,000, they're only willing to make 85 (the upward sloping supply curve has shifted left). But the demand is still at 100 for that price. So we have a shortage just like before, so the same thing happens, the price goes up and more are made. But it won't go up as high as a hundred. Now, the exact changes depends on the elasticity of the demand curve (at that point).

Now, what I'm saying is that if the price of cars goes up, people will hold on to their cars for longer, or hold off on buying a car at all. They won't buy a new car because they're tired of their old one, they'll wait until the cost of repairs becomes greater than the cost of buying a new car. Or they'll choose substitutes, such as used cars.

In the long run, people will have to buy new cars, and the demand is inelastic, as you note in your later example.

Now, all this is holding everything else the same. YOu note

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Let me explain that this kind of thing happened here in Ontario, with the advent of emissions testing. Many cars at the very bottom end were no longer legally driveable, and had to be taken off the road. Used car prices went up. New car sales also went up, as demand for vehicles continued to increase with a higher population and level of affluence - i.e. more multi-car owners.

By making illegal currently existing cars, that shifts the demand curve. An increase in population and income also shifts the demand curve. So, even if the emissions testing increased the supply costs (which it might not have if the standards were below that already being made by the newer cars) the demand curve made a strong shift to the right due to decrease in stock and increase in income and population so that people would want more cars at higher prices.

It's clear you don't understand the concepts of Supply and Demand. Supply is the number produced (for a certain price), and Demand is the number people want to buy (at a given price).
In your example the demand for cars is 5, not 100. And new cars and used cars have completely different demand curves (there's a different demand curve for each model, but we can aggregate for new cars as a whole).

The only thing that is clear is that this problem can't be explained with high-school economics, as we have tried to do here. If you can aggregate the demand for new cars, then why not aggregate it with the demand for all cars? The "demand" for a car at a given price is not necessarily distinct between a new car and a used car. A new $20K car, and a slightly used, slightly better car at $20K, are competing products in the eyes of most people. Where do you factor that in?

Simple economics and discussions of supply and demand curves are not going to solve this problem - most such economic problems deal with the supply of new items. But for cars - vehicles as a whole - there is a significant supply of used product of varying price and utility, and it's not as simple, because the product has that "second life" once the original owner has the need (or more importantly, the want) to get a new one.

My point, as you may or may not see, is that in increased cost for new cars - and thus the implication by Beachlife that fewer people would buy new cars - is that with the reduced overall number of vehicle available (I choose my words carefully not to say "supply"), the demand for all vehicles - new and used - is likely to stay the same. Prices will then go up. My opinion is that this will lead people to keep what they have - the majority of people out there have used vehicles, and if the price of all used cars goes up, you're probably better off keeping what you have and squeezing as much life out of it. Used car sales will not be "brisk" - exactly the opposite.

And to you all, including Doug, my point is that if the price of gas increases significantly, or even doubles, for many people (if not most), it will not affect whether or not they own a car. Even in the long run, it will more likely affect what kind of car they own (as their is a whole continuum of vehicles with varying fuel consumption, price, and utility), or how much non-critical driving they do. But they will still own those cars. Further to that, if there was a great sell-off of vehicles when gas went to $6 per gallon, the glut of used vehicles would reduce their value. We've seen price increases for gas - even large ones - and during those shortages in the 70's, people still owned cars - they just shifted to smaller cars and were more careful about unnecessary driving.

And if the price of gas here doubled, I don't think I'd do anything differently. In fact, I might very well buy a used SUV that someone can no longer afford to drive. But I drive very little these days, and I see my vehicle as "entertainment", to a certain extent. I'm not alone in this - lots of people actually like their car and think of it as something more than a tool for transportation.

In other words, I humbly disagree. I don't believe that the demand for vehicles as a whole (new, used, cars, trucks, SUV's, etc.) - is as elastic (with respect to the price of gas) as some of you imply. If it was, people would have bought bicycles instead of Hondas back in the 70's. Or bicycles instead of hybrids today.

I think that increased regulation *can* result in slower growth, however, I do not think it is a hard and fast rule, and certainly not one that can be borne out by fancy-schmancy formulae.

All other things being equal, increased regulation will raise producer costs which will, in the vast majority of cases, decrease output (Price times Quantity). Certainly other things can compensate and all other things are never equal.

As for "fancy-schmancy formulae" what alternatives do you propose? When discussing a science, you have to actually discuss the science and use the tools of the science.

But decreased productivity in one sector does not lead to decreased productivity in all sectors. Does it?

Of course not (though it can depending on the industries). But one sector with lower output means that the overall growth will be less than if the output for that sector was higher. That's a no-brainer.

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It will more than likely increase consumer cost, which *may* lead to decreased output, though not directly. Or, it may not lead to decreased output (recall the inelastic demand).

Ummm no...it will result in higher costs to produce. Let's say all cars need new emissions controls installed...that's an additional cost of production, regardless of what happens to the price. All other things being equal, if your costs go up, your output will go down in the majority of cases.

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My objection to Doug's statement that regulation decreases growth is that it is a gross overgeneralization which has had holes poked into it.

No, Doug's statement was a generalization, neither gross nor over. I thought I was clear in showing that in general increased regulation will result in lower output and higher prices. If I made a mistake in my calculations, please point them out.

Of course not (though it can depending on the industries). But one sector with lower output means that the overall growth will be less than if the output for that sector was higher. That's a no-brainer.

Not if the output for other sectors increases...

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Ummm no...it will result in higher costs to produce. Let's say all cars need new emissions controls installed...that's an additional cost of production, regardless of what happens to the price. All other things being equal, if your costs go up, your output will go down in the majority of cases.

I don't understand how higher costs directly equals decreased output. I get how it *could* lead to decreased output, but it seems to be a logical leap to say one leads directly to the other.

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No, Doug's statement was a generalization, neither gross nor over. I thought I was clear in showing that in general increased regulation will result in lower output and higher prices. If I made a mistake in my calculations, please point them out.

pinqy

I get how it makes prices potentially higher. Wouldn't it be silly, though, if consumer demand stays up even with increased costs, for a producer to just cut output? That is why I don't understand how higher costs leads directly to decreased output, as opposed to higher costs potentially leading, indirectly, to decreased output.

Of course not (though it can depending on the industries). But one sector with lower output means that the overall growth will be less than if the output for that sector was higher. That's a no-brainer.

Not if the output for other sectors increases...

Note the bold. It doesn't matter what the other sectors do, overall growth will not be as high if one sector does not grow as much as it would have under normal circumstances. I'm not sure what you're missing...perhaps you could give a scenario with numbers.

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I don't understand how higher costs directly equals decreased output. I get how it *could* lead to decreased output, but it seems to be a logical leap to say one leads directly to the other.

Remember we're holding everything else equal...If costs increase you cannot produce the same amount of product with the same inputs..that's self-obvious. So you produce fewer. Or you raise the price, in which case fewer people will buy the product, which means you don't make any. Either way, output decreases. There are, of course exceptions, especially with very inelastic goods. But it's true as a general principle.

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I get how it makes prices potentially higher. Wouldn't it be silly, though, if consumer demand stays up even with increased costs, for a producer to just cut output?

Why would the consumer demand shift? What would cause that? So, sure, if the Demand curve shifts to the right, then output won't decrease, but then that's not keeping everything else equal.

For Al Gore, it was an emotional homecoming, his first public appearance on Capitol Hill since he reluctantly certified the disputed 2000 election victory of George W. Bush.

But for some of his Republican opponents, yesterday was also circled on the calendar. It was an opportunity, as they saw it, to pounce on the former U.S. vice-president, shorn of his Hollywood sycophants and fawning audiences, to accuse him of shouting fire in a crowded theatre, a message of environmental alarm that has garnered him an Oscar, a Nobel Prize nomination and a global following.

On the one side, an Oklahoma Republican, James Inhofe, armed with charts and a prosecutorial style and his belief that man-made global warming is the greatest hoax ever perpetrated on the American public.

On the other, the professorial Gore and his wife, Tipper, sitting in the largest Senate committee room Washington can offer, an overflow crowd of young Hill staffers swarming around him for cellphone photos, hanging on his every word, applauding his pronouncements.

I really don't want to propagate random rumors. But something someone said about this issue recently made me think - what scientific background does Gore have with which to interpret this data? It could be significant - I just don't know. The only thing I've heard is "got a 'D' in Earth Science in college", but I don't know if that's the least bit true.

I really don't want to propagate random rumors. But something someone said about this issue recently made me think - what scientific background does Gore have with which to interpret this data? It could be significant - I just don't know. The only thing I've heard is "got a 'D' in Earth Science in college", but I don't know if that's the least bit true.

He isn't deriving any results. Most of his information that he says in his speeches have probably already been analyzed by researchers before hand. He isn't going to make speeches without checking up on the subject first.

He isn't deriving any results. Most of his information that he says in his speeches have probably already been analyzed by researchers before hand. He isn't going to make speeches without checking up on the subject first.

But if he doesn't have the knowhow to answer the Senate's questions about what he's saying...then why is he the one testifying? I only heard part of the testimony, but the back-and-forth with the skeptic sounded like a total waste of time because he didn't put up any counters that were the least bit convincing. (especially bad because he tried to use the totally illogical "carbon-neutral" defense for his excess use). I wish someone was up there who had the scientific weight behind them to adaquately counter the opposition's arguments.

Now, maybe Gore does know something and just didn't show it in the clips that I heard. So does anyone know if he has any scientific understanding or not?

He is the one testifying because he is a former senator, and he *does* have at least some scientific knowledge. It's not as if he's a novice on the topic, having started on it when he wrote "Earth in the Balance" in 1993.

The city of Belle Meade, Tennessee, had blocked his application until new rules were approved unanimously late Tuesday, said Gore spokesman Chris Song. The city, located within metropolitan Nashville, said the panels must be placed in areas where they can't be seen by neighbors.

Gore, who starred in the documentary film "An Inconvenient Truth" about global warming, already buys enough energy from renewable energy sources such as solar, wind and methane gas to balance 100 percent of his electricity costs.

He is also upgrading the furnace, windows, and light switches, as well as installing new floor radiant heat and solar vents, to improve the home's energy standards, said Kalee Kreider, a Gore spokeswoman.